Using RFID for Omnichannel Fulfillment Success

While retailers tested RFID technology in the supply chain over a decade ago, the landscape is much different now. Back then they were trying to determine RFID-driven efficiencies in their logistics operations. The focus then shifted to in-store inventory accuracy and customer experience applications using RFID.

While this in-store theme continues, retailers have started looking at their supply chains again in light of explosive ecommerce growth, but this time with omnichannel fulfillment as their main driver.

Supply chains need to be more resilient than ever to weather the constant storms of change. RFID is one of the key enabling technologies that supply chain professionals can use to mitigate risk and enable rewards. Many conversations with supply chain leaders have convinced me that regardless of how efficient logistics have become, there is still much room for improvement given new retail challenges and opportunities.

Supply chains have changed dramatically in the past few years to create new efficiencies, which in turn have reduced the margin for error. There has also been a sea change in consumer expectations, largely driven by Amazon. Specifically, omnichannel retailing has essentially broken the traditional supply chain into a direct line between vendor and consumer.

RFID technology enables visibility and efficiency in supply chain operations, and is making a difference in these 5 areas:

Reduction in overall inventory

Many supply chain leaders admitted to me that they increased their inventories by 15%-20% in anticipation of omnichannel orders. RFID inventory management can put working capital to work and make it available where needed to reduce the inventory buffer. Otherwise, excess inventory bloats the balance sheet and doesn’t necessarily guarantee a customer’s desired item will be in stock at checkout. Overstocks can be as problematic as out-of-stocks, since additional items in the backroom and sales floor make it harder to find specific items while competing for shelf space. 

Extending the supply chain to the end customer

Traditionally, the supply chain function at many retailers is responsible for getting product to the store, not the end customer. Omnichannel retailing means the supply chain is more involved in store fulfillment. Many logistics processes are now customer-facing, such as new delivery options like buy online pickup in store and ship from store. 

Managing transportation costs

Omnichannel fulfillment is wiping out many of the cost savings gained from centralized distribution, as aggregated shipments are making way for hundreds of small expedited shipments from store to store, or directly to consumers. Some retailers are providing cross-channel RFID inventory accuracy at the item level, so that inventory allocation at the store level can be more dynamic. This strategy keeps expedited inter-store transfers to a minimum. Dynamic inventory allocation and RFID-enabled ASN shipping and receiving can also help create efficiencies at flagship stores and distribution hubs near population centers that are taking on additional omnichannel fulfillment responsibilities. 

Risk reduction through chain-of-custody tracking

RFID is used to manage risk from multiple handoffs in the value chain. An increasing number of luxury goods and pharmaceutical firms are beginning to deploy these processes to guard against counterfeiting and diversion. 

Improved inventory allocation for fashion retailers

Historical sales figures are less reliable in inventory allocation for retailers that have a small percentage of replenishment items — after all, the aim of fast fashion is to sell out, not restock. RFID can provide up-to-the-minute inventory figures that can fuel a dynamic inventory allocation system for store shipments.

Consumer buying behavior is changing at a very fast pace. As a result, retail supply chain functions must be more efficient and do more than ever before. With omnichannel capabilities an absolute must for retail survival, RFID technology is helping to provide the agility and resilience retailers require. 

Anurag Nagpal is Director of RFID Solutions at Checkpoint Systems